Municipal    Ownership 

of 

Street  Railways 


With  an  Analysis  of  the  Accounts  of  the 
City  of  Glasgow  Tramways 


By  JAMES  MARWICK,  C.  A., 

of  Marwicfc,  Mitchell  &  Co. 
Chartered  Accountants. 


Reprinted  from  The  Wall  Street  Journal  of  June  3,  J905 


B 


MUMOIPAL  OWNERSHIP  OF  STREET 
RAILWAYS. 


With  an  Analysis  of  the  Accounts  of  the  City  of  Glasgow 
Tramways. 

BY  JAMES  MARWICK,  C.  A.  OF  MARWIOK,  MITCHELL  &  OO. 

[Chartered  Accountants,  79  Wall  Street,  New  York,  Chi- 
cago, Toledo  and  Minneapolis.] 

Whether  or  not  municipal  ownership  of  public  utili- 
ties, and  more  particularly  of  street  railways,  has  proved 
to  be  to  the  best  interests  of  the  communities  in  which 
they  are  operated,  is  a  question  to  which  students  off 
existing  conditions  might  well  prefer  to  withhold  their 
answer.  Economists  may  agree  that  theoretically  all 
public  utilities  should  be  controlled  by  municipalities,' 
but  they  would  not  be  likely  to  commit  themselves  to  a 
definite  statement  that  the  public  would  benefit  by  aj 
transfer  of  street  railway  systems  from  well  managed! 
private  corporations  to  political  parties  temporarily  in| 
control  of  city  governments  whatever  their  politics  might! 
be.  Eliminate  the  political  element  and  establish  a  de- 
partment of  street  railways  under  a  thoroughly  compet- 
ent and  permanent  management,  let  its  policy  be  pro- 
gressive, let  it  have  command  of  adequate  capital  to 
expend  at  the  right  time  on  repairs  and  extensions  and 
let  no  interference  be  permitted  under  any  circumstance^ 
in  the  hiring  or  disciplining  of  employees.  Then  andi 
then  only  does  it  appear  likely  that  municipal  ownership! 
can  be  to  the  advantage  of  the  public. 

These  conditions  exist  in  a  large  measure  in  the  oityj 
of  Glasgow,  which  is  generally  regarded  as  having  de-j 


2 

moiistrated  unequivocally  that  its  municipal  ownership 
has  been  successful.  From  the  American  progressive 
point  of  view,  however,  it  has  yet  to  make  tremendous 
progress  before  it  can  be  admitted  to  be  a  success  in  the 
full  sense  of  the  word.  It  is  a  success  in  so  far  as  it  ia 
making  money  and  affording  better  service  than  that 
afforded  by  the  private  corporation  which  previously 
operated  its  system.  But  the  private  corporation  was* 
practically  restrained  from  making  any  large  expendi- 
tures to  improve  the  system  as  it  was  not  accorded  such 
a  franchise  as  would  assure  its  having  an  opportunity 
of  reaping  the  benefit  of  improvements  made. 

It  was,  therefore,  left  to  the  municipal  government 
of  Glasgow  to  replace  the  old  horse  cars  with  electric 
traction.  That  such  a  change  should  have  resulted  in  a 
great  increase  in  travel  was  only  natural.  Consequently,' 
the  increase  should  not  be  attributed  to  the  superiority 
of  municipal  management.  Similar  increases  in  patron* 
age  were  experienced  in  the  cities  of  America  on  tho 
installation  of  cable  and  electric  traction  by  private  cor- 
porations. 

The  lesson  which  should  really  be  learned  from  ex- 
perience does  not  appear  to  be  generally  recognized.  It 
is  that  if  the  citizens  of  a  municipality  are  to  enjoy 
adequate  transportation  facilities  and  service,  they  must 
either  (a)  grant  to  a  private  corporation  long  term  or 
perpetual  franchises,  with  the  passenger  fare,  carrying 
transfer  privileges  fixed  at  a  reasonable  rate  and  the  taxes 
restricted  to  some  percentage  which  will  allow  fair  com- 
pensation to  the  municipality  for  the  concessions  granted 
or  (b)  have  their  municipal  government  acquire  and 
operate  the  system.  If  one  of  these  conditions  is  not 
accepted  inadequate  service  and  constant  friction  is  as- 
sured. Short  term  franchises  and  low  fares  will  not 
attract  the  capital  necessary  to  insure  a  well  equippe4 
and  operated  system.  The  capitalist  who  invests  hii 
money  in  the  street  railroad  plant  has  just  as  much  rigjxt 
to  require  that  his  investment  be  absolutely  secured  aa 
the  citizen  has  to  expect  him  to  afford  reasonable  trans- 
portation service. 

A  wave  of  antagonism  to  granting  to  private  cor- 
porations long  term  or  perpetual  franchises,  even  with 


reasonable  purchase  clauses  included,  appears  to  have 
swept  over  the  whole  country.  Municipal  ownership  is 
the  demand  of  the  reformers  and  their  numbers  are  ever 
increasing.  Therefore,  it  appears  that  a  thorough  test 
of  the  efficiency  of  municipal  operation  cannot  too  soon 
•be  made  in  one  of  the  larger  cities.  No  more  thorough 
test  could  be  made  than  in  Chicago.  Here  the  street 
transportation  conditions  have  for  years  been  most  un- 
satisfactory and  inadequate  and  the  franchises  are  in  a 
legal  tangle  involving  complications  which  the  law  courts 
alone  can  unravel.  Consequently,  the  time  would  now 
appear  ripe  for  the  test  of  municipal  ownership  but  not 
confiscation.  The  value  of  the  properties  and  franchises 
which  the  corporations  may  be  required  to  transfer  should 
be  adjudicated  with  due  regard  to  what  is  fair  alike  to 
the  capitalists  and  to  the  citizens.  No  exaggerated  values 
should  be  put  forward  by  either  party  in  apparaising  the 
properties  whether  tangible  or  intangible. 

Should  the  city  of  Chicago  acquire  it*  street  railways 
it  will  have  very  different  conditions  with  which  to  con- 
tend from  those  which  exist  in  Glasgow  even  at  the 
present  time.  There  the  total  miles  of  single  track 're- 
presents only  1.35  miles  per  10,000  of  population  as  com- 
pared with  5.85  miles  in  Chicago  and  7.3  miles  in  Pitts-; 
burgh.  There  the  population  only  averages  189  trips  per- 
capita  annually  as  compared  with  232  trips  in  Chicago 
and  263  trips  in  Pittsburgh.  There  the  average  number 
of  passengers  per  mile  of  single  track  averages  1,400,000 
as  compared  with  less  than  400,000  in  Chicago  and 
360,000  in  Pittsburgh. 

The  following  figures  taken  from  the  last  report  of 
the  Census  Bureau  show  the  conditions  in  six  of.  the 
largest  cities  of  America,  compared  with  those  of  Glas- 
gow for  the  year  ending  May  31,  1904. 

Track 
Miles 

/ Passenfrerg  Per — ,      Per 

Milea  Mile  10,000 

of  Car       Inhab-      of          Car      Pop- 

City        Population.  Track.    Mileage,    itant.   Track.    Mile,  illation. 
Glasgow....    1,000,000      185.00     16.291,082     189     1,400.000     11.6     1.85 
Chicago 1,769.951    1,086.24    102,866,407     989        895,985       4.0 


ittsburgh..  640,880  469.4T  84,811,111  963  869,197  4.9  783 

New  York..  8,548.996  1,299.10  180,499,586  966  726,416  5.9  8.66 

Philadelphia  1,293,697  517.58  61,175,495  956  640,165  5.4  4.00 

Boston 997,994  461.68  47,524,794  248  605,179  4.8  487 

Kansas  City.  937,042  181.24  15,979,864  941  815,817  8.6  7'.66 


The  contrast  in  the  mileage  figures  contained  In  this 
statement  is  remarkable  as  it  indicates  the  existence  of 
a  condition  in  Glasgow  with  its  million  of  population 
which  is  in  direct  contradiction  to  the  policy  of  munici- 
palities in  America  as  also  to  one  of  the  fundamental 
principles  of  rapid  transit.  Did  such  a  condition  exist  in 
an  American  city  it  would  not  be  tolerated,  but  such  an 
outcry  would  be  raised  against  the  company  in  control  of 
the  franchise  as  would  force  it  to  change  its  policy. 

In  making  a  success  from  a  money  point  of  view,  the 
mundcap<ality  of  Glasgow  has  apparently  almost  entirely 
overlooked  the  much  broader  benefits  which  accrue  to  a 
city  from  the  distribution  of  its  residents  over  a  wide 
area,  from  the  substitution  of  homes  m  the  suburb??  for 
the  overcrowded  tenements  of  the  city.  Contrast  the  lot 
od:  the  child  of  the  city  with  that  of  the  country  or  suburb 
— polluted  air  to  breath,  asphalt  or  stone  streets  for  a 
playground  as  against  the  fresh  air  from  the  country,  the 
grass  and  the  flowers  which  bring  home  even  to  the  par- 
ents themselves  a  realization  that  there  is  more  in  life 
than  asphalt  and  stone,  smoke  and  business.  Does  the 
piling  up  of  a  sinking  fund  on  the  top  of  ample  depreda- 
tion and  the  payment  of  liberal  bonuses  to  the  city  treas- 
ury in  addition  to  interest  on  its  investment  compensate 
for  the  loss  of  that  which  is  the  every  day  privilege  of 
th«  American  citizen?  Surely  the  moral  and  material 
welfare  of  the  people  must  outweigh  more  than 
commercialism.  Credit  is,  however,  due  to  Glasgow 
for  it  is  in  advance  of  any  other  city  in  the  United  King- 
dom and  it  proposes  to  build  41  miles  of  additional  track. 
Thereafter  its  total  of  198  miles  of  single  track  will  ex- 
ceed that  of  any  other  system  in  Europe,  excepting  Ber- 
lin, which  outranks  all  other  cities  on  the  continent  of 
Europe,  having  1.72  miles  of  track  per  10,000  of  popula- 
tion. * 

The  official  statistics  of  the  census  bureau  demon- 
strate that  following  the  extensions  of  rapid  transit  sys- 
tems in  America  there  has  been  a  tremendous  increase  in 
the  number  of  residents  in  suburban  districts  and  a  great 
expansion  of  thes-e  districts  coincident  with  a  contraction 
in  the  density  of  the  city  districts,  excepting  those  occu- 
pied by  the  poorest  glasses,  who  cannot  afford  to  pay 


a  minimum  rate  of  fare.  It  hardly  seems  possible  that 
a  similar^  extsnsion  of  the  tramway  system  of  Glasgow 
would  not  have  a  similar  effect  in  opening  up  attractive 
suburban  districts  In  this  vicinity.  Thus  the  mass  of  well- 
to-do-  citizens  would  be  encouraged  to  seek  homes  therein 
in  preference  to  living  in  their  terraces  and  tenements  in 
the  center  of  the  city — and  the  sooner  that  these  are 
abandoned  the  better  for  the  whole  community.  Were 
mora  of  the  progressiveness  of  the  American  introduced 
into  the  system,  city  dwellers  would  soon  be  accorded  every 
facility  to  reach  the  suburbs  in  quick  time  and  at  reason- 
able expense. 

An  impartial  investigation  shows  conclusively  that  it 
is  not  municipal  managment  but  the  contraction  of  tiho 
population  within  narrow  limits  and  the  restricted  street 
mileage,  only  65  miles  for  a  population  of  1,000,000,  that 
permits  of  such  profits  as  those  shown  in  the  statement 
of  accounts  of  the  city  of  Glasgow  for  the  year  1904.  A 
franchise  such  as  that  enjoyad  by  the  municipal  managers 
could  be  sold  for  a  high  price  in  America  and  strong  com- 
petition would  be  developed  for  a  further  franchise  that 
would  extend  over  the  districts  not  already  occupied. 
Thus  the  total  mHeaga  could  be  brought  more  into  accord 
with  the  American  standard  of  a  city  of  its  magnitude. 
Such  facts  seem  to  demonstrate  that  municipal  ownership 
has  not  yet  been  made  a  success  in  the  broadest  sense  of 
the  word  even  in  Glasgow.  This,  however,  does  not  alter 
the  fact  that  a  test  of  municipal  control  is  not  undesirable 
in  America. 

The  great  obstacle  to  the  wider  distribution  of  the 
population  of  Glasgow  is  the  system  of  graduated  fares 
now  in  oparation.  A  somewhat  similar  system  has  al- 
ready bsen  proved  to  be  undesirable  in  Germany  and  has 
been  abandoned.  In  America  the  system  has  been  every- 
where rejected.  The  system  is  as  follows:.  "Each  route 
is  divided  into  half-mils  stages,  the  fare  for  this  stage  be- 
ing a  half  penny  (lc;).  The  fare  for  any  four  half -penny 
stages  is  one  penny  (2c.)  and  for  any  six,  three  half  pen- 
nies (8c.),  any  sight,  two-pence  (4c.)  and  so  up  to  four- 
pence  (8c.).  In  1904,  the  total  number  of  fare  passen- 
gers carried  was  188,962,610  as  compared  with  410,284,094 


in  Chicago  and  168,632,339  in  Pittsburg,  but  the  average 
fare  in  Glasgow  was  slightly  less  than  two  cents  compared 
with  the  5-cent  fares  of  Chicago  and  Pittsburg.  This  im- 
plies that  the  average  distance  travelled  in  Glasgow  was 
somewhere  between  a  half  a  mile  and  two  miles.  What 
tha  comparative  distance!  were  in  Chicago  and  Pitts- 
burg, there  is  no  means  of  ascertaining,  as  a  passenger 
can  travel  to  the  extreme  limits  of  their  systems  for  one 
fare  of  five  cent.  For  this  reason  statistics  are  frequent- 
ly submitted  to  show  that  transportation  in  this  country 
is  cheaper  than  in  Glasgow.  Though  it  might  be  cheaper 
if  everyone  travelled  long  distances,  in  practical  operation 
it  is  net  so,  for  over  30%  of  the  passengers  pay  the  mini- 
mum fare  of  1  cent  and  61%  the  2-cent  far-a,  leaving  less 
than  9%  to  pay  3  cents  or  over,  their  fares  representing 
1.67%  of  the  total  passenger  revenue. 

Taking  into  account  the  population  of  Glasgow  and 
the  distance  of  the  commercial  and  manufacturing  cen- 
ters from  the  suburbs,  these  statistics  are  sufficient  evi- 
dence that  the  system  of  graduated  fares  acts  as  a  pre- 
mium to  deter  people  from  living  in  the  suburbs.  The 
pernicious  effects  can  only  be  obviated  by  following  the 
example  of  Germany  and  abandoning  the  system.  London 
has  already  set  a  partial  example  to  the  rest  of  the  United 
Kingdom  by  adopting  the  uniform  fare  in  its  electric  sub- 
way, known  as  the  "tuppenny  tube." 

The  management  of  the  Glasgow  corporation  tram- 
ways is  to  be  congratulated  on  the  comprehensive  charac- 
ter of  the  report,  statements  of  accounts  and  statistics  of 
operation  which  it  issues.  While  some  few  of  the  street 
railway  corporations  of  America  do  issue  annual  reports 
which  afford  considerable  information  to  their  stockhold- 
ers, none  of  them  are  so  complete  as  that  of  Glasgow. 
The  great  majority  of  American  companies,  however,  do 
not  publish  any  reports,  or  only  issue  statements  of  the 
most  meager  character.  A  striking  feature  of  the  re- 
porta  published  by  Glasgow  is  the  account  in  which  the 
details  of  the  capital  expenditures  are  set  forth.  They 
are  so  clearly  stated  that  the  cost  of  the  plant  or  equip- 
ment in  each  department  of  the  system  can  readily  be  as- 
certained, as  also  the  amount  of  depreciation  written  off 


from  year  to  year.  This  very  publicity  is  a  safeguard 
against  the  financial  schemes  which  have  been  BO  detri- 
mental to  the  stockholders  of  metropolitan  companies  of 
this  country,  as  well  as  to  the  public  who  have  in  conse- 
quence had  to  submit  to  inferior  service.  In  these  ac- 
counts there  are  no  undistributed  construction  expendi- 
tures. Each  item  of  expense  is  classified  under  its  appro- 
priate head.  Further,  the  accounts  are  regular'^  audited 
by  chartered  accountants  of  high  standing,  thoroughly 
trained  in  their  profession  and  characteristically  inde- 
pendent in  the  discharge  of  their  duties,  who  would  not 
tolerate  any  irregularities  or  permit  of  any  equivocation. 
That  the  accounts  are  not  submitted  in  the  same  form 
as  that  generally  approved  in  America  is  of  relatively 
little  importance.  The  differences  are  merely  matters  of 
detail. 

The  capital  account,  which  records  the  expenditures 
by  Glasgow  on  construction  and  equipment,  shows  a 
charge  of  $10,226,450,  of  which  $9,916,525  was  borrowed 
money.  This  amount  has,  however,  been  reduced  to 
$8,879,835  by  means  of  sinking  fund  accumulations.  The 
present  capital  liability  thus  averages  $60,000  per  mile 
of  single  track.  In  comparing  this  liability  with  that  of 
American  cities  some  allowance  has  to  be  made  for  the 
differences  in  cost  of  labor  and  material  in  the  two  coun- 
tries. 

Comparative  capital  liabilities  per  track  mile  where 
the  overhead  trolley  system  is  in  general  use: 

Mileage Liabilities 

City.  Electric.  Cable.  per  mile. 

Glasgow    *147.50  $60,202 

Chicago    826.82  91.70  109,537 

Pittsburg    464.25  5.22  185,170 

Boston    *451.68  97.353 

Philadelphia    517.53  165,085 

8t  Louis    896.21  198,647 

Kansas  City 148.24  33.00  119,606 

*The  average  miles  in  operation  during  the  year  in 
Glasgow  was  135.  The  Boston  mileage  includes  16.02 
miles  of  elevated  track  which  adds  considerable  to  the 
average  cost  of  construction. 


8 


The  following  statement  explains  the  relatively  low 
average  liabilities  per  mile  of  track  in  Chicago: 

Length  Cable      Liability 

Name  of  company:  of  track.        traction,  per  mile. 

Chicago  City  Railway  Co.  222.50  41.10          $80,899 

Chicago  Un  Traction  Co.  305.32  50.60          268,577 

Chicago  Con  Traction  Co.  206.51  161,032 

Sundry  railway  companies  183.19  47,462 

The  system  of  publicity  in  accounting  methods  as 
adopted  in  Glasgow  tends  to  keep  down  the  capital  liabili- 
ties, as  t!he  cost  of  all  property  owned  is  shown  in  detail. 
No  item  is  included  in  the  statement  of  assets  at  exag- 
gerated values.  Whatever  is  sold,  destroyed  or  other- 
wise disposed  of  or  becomes  obsolete  is  written  off.  Thus 
the  balance  sheet  is  as  approximately  correct  a  statement 
.of  actual  facts  as  can  be  prepared. 

REVENUE   ACCOUNT. 

The  following  statement  shows  the  general  rejults 
of  the  operations  of  the  Glasgow  Tramways  for  the  year 
ending  May  31,  1904.  The  statement  is  framed  so  as  to 
show  the  results  for  each  1,000  of  inhabitants  so  that  a 
comparison  may  be  made  with  the  average  results  obtain- 
ed  in  all  the  cities  of  America  having  500,000  or  more 
inhabitants.  Such  a  comparison  cannot  be  absolutely  ac- 
curate, but  it  is  approximately  so,  the  data  being  b<?scd 
on  the  report  of  the  census  'bureau.  To  ascertain  the 
gross  figures  for  Glasgow  add  000  to  the  figures  stated: 


CONDENSED  REVENUE  ACCOUNT. 

Oity  of  American 

Glasgow.  oitiet. 

Operating   earnings    $3,482  11,731 

Operating  expenses    2,238  6,534  j 

Net  earnings    $1,244  $5.197 

Income  from  other  sources   33  240 

Earnings  less  operating  exp.. .   $1,277  $5.487 

Deductions  from   income    1,065  2,079 

Tfcxea   169  779 

Interest 801  2,181 

Sinking  fund 282  .... 

Special  depreciation 801 

Miscellaneous .,         62  19 

Net  income   $212  2,458 

Dividends    ,                                              121  2,034 


Surplus    $91  $124 

In  the  case  of  Glasgow,  the  dividends  represent  a 
cash  payment  to  the  city  fund,  known  as  the  common 
good,  while  the  surplus  was  transferred  to  a  general  re- 
serve fund  which  is  used  for  defraying  extraordinary  ex- 
penses on  buildings,  etc. 

This   statement  develops  very  important   differences 
between  the  operations  as  conducted  in  American  c'tles 
and  Gksgow.    The  most  conspicuous  of  which  is  the  rela- 
tively low  earnings  per  capita  in  Glasgow.     They  aver- 
age  only   $3.48    as   compared   with   $11.73    in   American 
cities.     The   Glasgow   charge  for  taxes  per  capita  aver-, 
ages  $0.17  as  compared  with  $0.78  and  for  interest  and, 
dividends  $0.42  as  compared  with  $4.12  in  the  American  j 
cities. 

The  ratio  of  the  operating  expenses  to  the  operating  j 
earnings  is  for  Glasgow  64.27%  and  for  American  citietj 
55.70%.  The  operating  expenses  of  Glasgow,  however,' 
includes  appropriations  for  renewals  and  depreciation  ag- 
gregating 19.38%,  exclusive  of  the  special  depreciation 
of  8.64%  deducted  from  income.  An  analysis  of  the  ex- 


10 

penses  shows  remarkable  differences  in  various  expenses. 
These  are  shown  in  the  following  statements: 

Ratio  of  expenses  to  earnings: 

City  of  Glasgow  Amer. 

Department  of                    Depreciation  Cities 

operating  expenses.        Incl.        Am't.      Excl.  Am't. 

Ma.  of  way  &  struct. ..   16.52        12.39          4.13  4.25 

Main,  of  equipment...  12.38          6.99          5.39  7.12 

Op  of  power  plant 2.83          2.83  7.97 

Operation  of  cars 27.50          27.50  25.73 

Gen.  exp.,  incl.  taxes..     5.04         5.04  10.63 

Special  depreciation  . .      8.64          8.64 


Total  oper.  expanses.  72.91        28.02        44.89        55.70 

Taxes 4.66         ....          4.86          6.64 

These  percentages  show  that  the  management  of  tho 
Glasgow  tramways  appreciates  the  necessity  of  making 
ample  provision  for  renewals  and  depreciation.  Their 
action  in  this  respect  is  in  striking  contrast  with  that  of 
almost  every  company  operating  street  railways  in  Amer- 
ica. The  argument  that  a  franchise  increases  in  value 
in  a  ratio  that  more  than  offsets  the  depreciation  is  a  very 
unsafe  one  for  the  stockholders  of  street  railway  com- 
panies to  accept  as  an  excuse  for  the  failure  to  make  such 
provisions.  There  may  be  some  f  orea  in  it  where  the  fran- 
chise is  exclusive  and  perpetual  provided  the  taxes,  includ- 
ing franchis-9  taxes,  are  also  restricted  to  a  certain  maxi- 
mum percentage  of  earnings.  In  all  cases  where  the 
franchise  is  for  a  limited  period,  the  failure  to  make  reas- 
onable provision  is  absolutely  and  unjustifiable  and  cer- 
tain to  result  in  trouble  to  the  stockholders,  sooner  or 
later,  when  borrowing  powers  are  exhausted,  as  also  to 
the  citizens,  for  they  will  inevitably  suffer  from  bad  ser- 
vice. This  subject  is  of  such  importance  to  all  communi- 
ties that  the  rtaes  of  depreciation  charged  in  Glasgow  are 
here  stated  in  detail: 


11 

Depreciation.  Per  cent,  of  cost. 

Electrical  equipment  of  lines 3.09 

Buildings  and  fixtures 2.50 

Powar  stations,  etc.,  plant 5.00 

Workshop  tools 7.50 

Can 7.50 

Electric  equipment  of  cars 7.50 

Miscellaneous  equipment 5.81 

Furniture 7.50 

A  permanent  renewal  fund  is  annually  credited  with 
$2,182.50  per  mile  of  single  track. 

The  permanent  way  renewal  fund  now  has  a  balance 
at  its  credit  of  $936,079.  During  the  year  there  was  ex-' 
pended  from  this  fund  $22,893  in  addition  to  the  amount 
charged  against  earnings.  Irrespective  of  the  12.39%  set 
aside  in  renewal  funds,  the  amount  thus  actually  expend- 
ed in  Glasgow  on  repairs  and  renewals,  was  equal  to 
4.80%  of  the  earnings  as  compared  with  4.25%  in  the 
case  of  American  cities.  In  the  American  cities  no  re-, 
nevral  funds  were  set  aside. 

It  has  further  to  be  observed  that,  in  addition  to  the 
depreciation  charges,  a  special  sinking  fund  of  2%  of  the 
amount  borrowed,  with  3%  interest  on  accumulations,  is 
annually  set  up.  The  accumulations  in  this  fund  should 
'be  sufficient  to  discharge  the  total  indebtedness  of  the 
property  in  thirty-one  years.  Exception  may,  however,  be 
taken  to  the  fact  that  neither  the  depreciation  and  re- 
newal fimds  nor  tho  sinking  fund  is  specially  set  aside  in 
cash  or  high  grade  marketable  securities,  but  that  the 
funds  so  created  are  invested  in  extensions  of  the  sys- 
tem. As  the  great  object  of  renewal  funds  is  to  have  the 
cash  available  when  the  renewals  become  desirable,  the 
funds  should  be  invested  in  readily  realizable  securities. 

In  the  following  statement  a  comparison  is  made  be- 
tween the  ratio  that  the  separate  items  bear  to  the  total 
amount  of  the  operating  expenses  in  Glasgow  and  in 
America.  So  that  the  comparison  may  be  the  more  ef- 
fective, the  largo  amounts  charged  for  depreciation  in  the 
Glasgow  accounts  have  been  eliminated  and  the  actual 
cash  expenditures  only  shown.  The  American  percent- 
ages are  tihe  averages  of  seventeen  of  the  largest  operat- 
ing companies  in  America. 


12 


Percentage  of  total  operating  expenses  assignable  to: 

City  of    Cities  of 
**  Glasgow.  America 

Maintenance  of  way  and  structure,  total     10.52  8.1^ 

Track  and  roadway 6.35  5.2 

Electric,   cable,   etc.,  lines    1.97  2.2 

Buildings  and  fixtures 2.20  .7 

Maintenance  of  equipment,   total 11.80  12.3 

Steam  and  electric,  etc.,  plant 1.67  1.7 

Oars 5.82  6.2 

Electric,  cable,  etc.,  equipment  of  cars       3.34  3.8 

Miscellaneous  equipment 97  1.1, 

Operation  of  power  plant,  total 6.21  12.7, 

Power  plant  wages 2.57  2.7J 

Fuel  for  power 2.99  7.9 

Water  for  po-wer .27  .5 

Miscellaneous  supplies  and  expense  . .         .88  A 

Hired  power 1.8 

Operation  of  cars,  total 60.39  47.8 

Superintendence  of  transportation   . .       1.38  2.4 

Wages  of  conductors  and  motormen.     43.76  37.4 

Wages   of   other  ear-service  employes       8.14  2.1 

Wages   of  oar-house  employes    5.50  2.2 

Car  service  supplies 4.44  .9 

Miscellaneous  car-service  expenses    . .       1.24  1.8 

Cleaning  and  sanding  track .93  1.0 

Miscellaneous  expenses,  total 11.08  19.1 

Salaries  of  general  officers  and  clerks       1.89  2.5 

Printing  and  stationery 71  .3 

Miscellaneous  office  expenses .11  .4 

Storeroom  expenses .25  .2 

Miscellaneous  general  expenses    1.71  2.8 

Damages  and  legal  exp.  in  connection       5.09  10.1 

O  bher  legal  expenses 04  .7 

Bents  of  land,  buildings,  etc 88  .9 

Insurance 40  1.2 

.100.00         100.0 

It  is  not  the  intention  to  enter  here  into  a  detaiiled 
criticism  of  the  operating  of  the  Glasgow  tramways. 
Further,  comparative  figures  of  American  companies  are 
not  available,  the  companies  generally  regarding  them  as 
private  property  to  which  the  public  are  not  entitled.  To 


is 


one  or  two  Items,  however,  Mef  reference  might  be 
made.  The  most  conspicuous  difference  in  the  two  state* 
ments  is  perhaps  in  that  of  cost  of  power.  The  Glasgow 
reports  show  that  the  average  cost  per  kilowatt  hour 
is  approximately  0.62  cents.  This  rate  doubtless  ap- 
pears low  to  the  managers  of  the  surface  roads  of  Chi- 
cago, whose  cost  of  power  is  from  75  to  100%  higher. 
However,  there  are  not  any  insurmountable  obstacles  to 
producing  power  at  even  lower  rates  in  Chicago,  where 
coal  is  cheap.  It  is  merely  a  matter  of  installing  modern 
power  houses  and  operating  them  economically.  In  the 
production  of  power  the  cost  of  labor  is  comparatively 
small.  The  large  cost  is  for  coal,  and  where  coal  is 
cheap  the  power  should  be  cheap.  Power  should  be  pro- 
duced in  Chicago  at  a  cost  not  exceeding  0.50  cents. 
Conspicuous  difference  is  the  percentage  of  damages  and 
legal  expenses  in  connection  therewith.  In  Glasgow  the 
tramway  management  avoid  any  excessive  loss  through 
accidents  by  insurance  covering  both  the  employers'  lia- 
bility and  third  party  accident  risks.  In  America  it  fa 
usual  for  the  companies  to  take  the  risks  themselves  and 
pay  damages  where  liability  attaches  to  them  in  the  event 
of  an  accident. 

The  difference  in  the  percentage  of  wages  of  conduc- 
tors and  motormen  is  largely  due  to  the  slower  speed  of 
the  cars  in  Glasgow.  The  rate  of  wages  per  hour  per 
man  in  Glasgow  is  less  than  in  America,  but  the  Glasgow 
man  does  not  make  as  great  mileage  in  any  given  tune. 
The  percentage  Is  also  ntfected  to  somo  extent  by  the 
higher  sreneral  ratio  of  the  total  pxp-snscs  in  America, 
to  the  higher  cost  of  power  and  of  damages, 


WAIT    FOE    CHICAGO. 


EDITORIAL  COMMENT. 

[From  The  Wall  Street  Journal  of  June  3,  1905.] 

In  order  the  better  to  carry  out  his  policy  of  munici 
«al  ownership,  Mayor  Dunne  of  Chicago  has  brought  to 
this  country  Mr.  Dalrymple,  superintendent  of  the  muni- 
cipal street  railways  of  Glasgow,  so  as  to  have  the  benefit 
of  his  experience.  The  thorough  analysis  of  the  accounts 
of  the  Glasgow  tramways  by  Mr.  James  Marwick,  pub- 
lished in  another  column,  presents  the  results  of  munici- 
pal ownership  in  that  city  in  a  most  comprehensive  way. 

There  can  be  no  doubt  whatever  that  Glasgow  has 
achieved  remarkable  results  under  a  system  of  municipal 
ownership  and  operation  of  street  railways.  The  service 
to  the  public  has  been  improved  and  the  rates  of  fare  re- 
duced, and  at  the  same  time  the  system  is  operated  at  a 
profit  to  the  city.  As  Mr.  Marwick  shows,  the  operation 
of  the  railways  last  year  left  a  considerable  dividend, 
which  went  to  the  city  funds  known  a*  the  "common 
good,"  and  ftill  a  surplus  remained,  which  went  into  a 
reserve  for  defraying  extraordinary  expenses. 

These  results,  however,  are  by  no  means  conclusive 
as  to  the  policy  of  establishing  municipal  ownership  in 
this  country.  We  commend  to  all  who  are  interested  in 
this  question  Mr.  Marwick'g  most  painstaking  and  admir- 
able paper.  A  careful  reading  of  it,  it  seems  to  us,  raises 
teveral  doubts  which  can  only  be  removed  by  actual  ex- 
perience. 

First,  there  is  the  doubt  as  to  the  honesty  and  effi- 
ciency of  municipal  operation  in  view  of  the  well  known 
corruption  and  costliness  of  the  administration  of  Amer- 
ican cities.  Until  we  have  purified  our  municipal  govern- 


15 


jients  and  divorced  their  administration  from  partisan 
and  "ring"  politics,  the  question  is  whether  it  is  advisable 
to  change  from  private  ownership  of  public  utilities,  how- 
ever great  may  be  some  of  the  evils  connected  therewith, 
to  municipal  ownership  and  operation. 

Another  doubt  suggested  by  Mr.  Marwick*s  paper  JB 
whether  it  would  be  advisable  to  adopt  here  the  methods 
employed  in  Glasgow  which  permit  of  such  large  earnings 
on  such  low  rates  of  fare.  The  Glasgow  system  of  rates 
of  fare  graduated  according  to  the  distance  travelled  re- 
sults in  an  enormous  congestion  of  the  population  and 
increases  the  herding  of  the  poor  in  the  tenement  house 
districts.  The  American  system  of  fares,  the  same  for 
long  as  for  short  distances,  with  manifold  transfers,  tends 
to  distribute  the  population  over  wide  areas.  The  latter 
from  every  point  of  view  is  the  better. 

Chicago  has  kindly  undertaken  the  task  of  testing 
municipal  ownership  for  the  other  American  cities.  Let 
!N"ew  York  and  the  other  cities  yield  to  Chicago  that  dis- 
tinction, and  meanwhile  wait  with  patience  the  results  «/ 
her  experience. 


MARWICK,  MITCHELL  &  Co. 


CHARTERED    ACCOUNTANTS, 
79  WALL  STREET,  NEW  YORK, 

TELEPHONE  4678  BROAD. 


CHICAGO 

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